Thursday 30 January 2014 03.25 EST
First published on Thursday 30 January 2014 01.08 EST

Tony Abbott has drawn a line in the sand concerning questions of industry assistance after his government rejected a plea from food processing company SPC Ardmona for a $25m grant to retool and modernise its business in Shepparton.

The rejection of SPC’s request came after a three-hour discussion by the federal cabinet on Thursday. Going into the talks, senior ministers were divided, and Liberal backbencher Sharman Stone – whose Murray constituency covers the factory – was campaigning publicly for the government to give SPC the cash.

Abbott used a press conference following the cabinet meeting to assert a definitional stance on “corporate welfare”.

Companies would not get handouts from the Coalition for costs they should be meeting for themselves. The prime minister said it was up to government to provide the policy conditions in which businesses could flourish, but it was up to businesses themselves to lead and fund their own transformations.

The industry minister, Ian Macfarlane, who stood up for SPC in the government’s internal deliberations, publicly echoed the prime minister’s line.

“This is a clear delineation of where this government thinks it needs to go with industry policy,” Macfarlane said on Thursday.

It fell to Macfarlane in the press conference to actually confirm the specific decision on SPC that Abbott had only hinted at in his opening remarks. It was the industry minister who said the request had been knocked back.

SPC – Australia’s last remaining fruit and vegetable processor – warned last year it would be forced to close if the government refused to proceed with the $25m grant promised by the former Labor government.

SPC’s parent company, Coca Cola Amatil, in a statement issued after the cabinet deliberations, said it was disappointed with the decision. It would now review SPC’s value, and write down assets including brands and goodwill, and make a further statement on the operation late in February.

Peter Kelly, managing director of SPC Ardmona said the decision would be a shock to food manufacturers in Australia. “This is an unexpected and extremely disappointing decision by the Coalition, particularly after the enormous support we have received for our business plans from the local community and beyond,” he said.

He issued a stark warning about the period ahead: “To build a sustainable and profitable business in Australia you need to innovate; to innovate you need to invest. Without investment some of Australia’s best loved packaged fruit and vegetables brands may disappear and consumers won’t have a choice to buy clean, green Australian packaged grown fruit at retailers.”

The two companies warned the federal knockback would put in jeopardy assistance from the Victorian government. It said its current investment plans were dependent on both the federal and state grants proceeding.

Coca-Cola Amatil group managing director Terry Davis said: “The government decision is disappointing in light of the fact that SPC Ardmona had presented to both the federal and Victorian governments a solid business case for a one-off co-investment of $25m each with CCA committing to a significant and much greater investment of more than $90m.”

The federal opposition blasted the decision. “By failing to support SPC Ardmona’s request for co-investment the government has effectively signed the death warrant on Australia’s last fresh fruit cannery, ensuring the destruction of thousands of jobs,” said the acting Labor leader, Tanya Plibersek.

“SPC Ardmona is an Australian icon that has prospered and employed generations of Australians for close to a century.”

Abbott attempted to put the ball back squarely in Coca Cola Amatil’s court. The parent company, Abbott reasoned, had the resources to stand behind the fruit processor, and was already in the process of transforming the business.

The prime minister rebuffed arguments from Stone about the negative impact on non-intervention in the Shepparton region. “Shepparton will continue to be a very dynamic town,” Abbott said.

Abbott pointed to a “necessary restructure” at the company to ensure its business remained viable, including the renegotiation of an enterprise agreement he said was overly generous. He said the government was supportive of that restructure.

The prime minister said companies protected jobs when they successfully restructured their businesses in line with prevailing economic conditions – and the government’s hands-off stance was aimed at maximising jobs in the long term.

Anticipating blowback over job losses, Abbott offered the following rationale. “This is a government which is committed to trying to maximise employment for the future. The best way to ensure that is the case is for business to lead the restructuring necessary to ensure companies like this have a future.”

Stone, in backing her local manufacturer, had raised the obvious contradiction between the Coalition positioning itself post-election as antithetical to corporate welfare, and promising chocolate maker Cadbury a bailout in Tasmania prior to the election.

Stone pointed out that Cadbury’s parent, like Coca Cola Amatil, was well resourced and profitable.

But Abbott claimed the two cases were “fundamentally different". He said SPC had asked for cash for activities that were part of the normal costs of running a business, whereas the grant for Cadbury was designed to boost Tasmanian tourism.

The Cadbury handout, he said, was “a pre-election commitment and an investment in tourism”.

Stone told the ABC after the cabinet decision that she was “shocked" and had a “sick feeling in the stomach”.

The Liberal backbencher objected to how Tony Abbott had framed the issue when announcing the decision. She said the transformational challenge facing SPC had nothing to do with workplace relations. “This is about cheap imported fruit. How can you compete?”

She said she was “praying” that the companies would stand behind the processing plant when the situation was clarified ultimately in late February. SPC workers who lost their jobs would not find re-employment in Shepparton, and would end up on welfare, Stone said.